In a recent decision, the New York State Court of Appeals provided important guidance to employers drafting employment agreements. In Goldman v. White Plains Center for Nursing Care, LLC, 11 N.Y.3d 173 (2008), the Court considered the nature of an employment relationship when an employee continues working past the expiration of his or her employment agreement. The Court rejected the employee’s contention that working beyond the two-year term of her contract gave rise to successive one-year implied contracts, holding, instead, that she became employed at will. The decision makes clear, however, that the outcome is case specific and depends upon the language of the employment agreement.

The Facts

On April 1, 1990, plaintiff Lorraine Goldman began working under an employment agreement as the administrative director of two skilled nursing facilities. The agreement included a two-year term.

The agreement also contained specific provisions regarding renewal. It provided that Goldman and her employer would “‘enter into good faith negotiations … with respect to renewal of th[e] Agreement on mutually agreeable terms’” at least nine months before the contract was scheduled to expire. The agreement did not contain an automatic renewal provision. Instead, it stated that once it expired, the employer would “‘be released of any responsibility or obligation hereunder, except for payment of salary and benefits accrued.’”

The agreement contained a provision allowing Goldman and her employer to terminate the agreement upon mutual consent. Alternatively, the agreement could be terminated “‘[b]y either party giving notice to the other at least six (6) months prior to the end of the Employment Period of its intention not to renew this Agreement.’” The agreement also included a provision stating that it contained the parties’ “‘entire Agreement and understanding’” and could “‘not be changed, modified or amended, except by a writing signed by’” them.

Goldman performed her duties pursuant to the employment agreement. During the two year period, she and her employer did not discuss renewing or terminating the employment agreement. After the agreement expired on March 31, 1992, she continued her employment.

In October 2004, defendants White Plains Center for Nursing Care, LLC and NMC Acquisitions, LLC (collectively, “White Plains Center”) purchased the skilled nursing facilities. In connection with the purchase, White Plains Center acquired the facilities’ contracts, including Goldman’s employment agreement. Three months later, the new employer terminated her employment.

The Trial Court

Following the termination of her employment, Goldman filed suit in New York State Supreme Court for, inter alia, breach of contract. The court granted summary judgment in her favor, ruling that her “continued employment following the expiration of the original two-year agreement gave rise to a presumption that the parties intended to renew the contract for successive one-year terms.” White Plains Center appealed.

The Appellate Division

The Appellate Division reversed, holding that the express terms of the contract precluded a finding that the parties intended an implied contractual arrangement to arise following the expiration of the agreement’s original term. The New York State Court of Appeals granted Goldman leave to appeal.

The Court of Appeals

The decision of the Court of Appeals hinged upon a “fundamental tenet of contract law,” that “agreements are construed in accordance with the intent of the parties and the best evidence of the parties’ intent is what they express in their written contract.”

In considering the parties’ intent, the Court observed that Goldman’s employment agreement expressly provided that: (1) renewal must be negotiated before the term’s expiration; (2) it would expire if the parties failed to reach an agreement extending the term; (3) if the parties permitted the agreement to expire at the end of the two-year term, the employer would not owe any further obligations to Goldman other than to compensate her for accrued salary and benefits; and (4) modifications could only be made in a signed writing. These provisions, the Court explained, “unambiguously indicate that the parties understood that the employment contract would end at the conclusion of the two-year period unless an extension was agreed upon.”

The Court rejected Goldman’s argument that a “one-year implied contract on the same terms as set forth in the original agreement was created each year that her employment continued after the expiration of the written contract.” According to the Court, this argument is “contrary to the renewal provisions of the agreement” and “conflicts with the well-established rule” that employment relations are presumed to be “at will,” absent an agreement establishing otherwise.

Goldman relied upon a common law presumption that “parties intend to renew an employment agreement for an additional year where the employee continues to work after expiration of an employment contract.” The Court explained, however, that where, as in this case, “the employer and employee agree that the contract memorializes their understanding, can be modified only in writing and expires on a specified date absent additional negotiations for a new agreement,” applying this presumption “would be contrary to principles of contract interpretation and the employment-at-will doctrine.”

The Court noted that parties can avoid uncertainty in employment agreements simply by specifying the nature of the relationship intended if employment continues beyond expiration of the agreement's term. The Court affirmed the Order of the Appellate Division.

Conclusion

The Goldman decision should not be misinterpreted as holding that an employment relationship extending beyond the express term of a written employment agreement is necessarily at will. The Court only concluded that an at will relationship existed in that case because of the particular terms of the employment agreement. New York employers should consult with counsel to ensure that their agreements are carefully drafted to lead to the same result.